FCPAméricas Blog
Brazil’s Anti-Corruption Bill: Key Provisions for Companies
5.01.2013
As discussed in a prior post, the Brazilian House of Representatives last week took a significant step toward revamping anti-corruption law in that country. On April 24, 2013, its Special Committee approved an anti-corruption bill that will overhaul the country’s laws targeting bribery and other forms of corruption. The legislation, known commonly as the Clean Companies Act (Bill 6.826/2010), now goes to the Senate where approval is expected. Here are some of the most notable aspects of the legislation.
Here are some of the key provisions that companies should know.
Corporate Liability. Corporate entities, including non-Brazilian companies with an office, branch, or representation in Brazil, are now subject to civil liability in Brazil for corrupt acts. In particular, the law would make companies liable for the acts of their directors, officers, employees, and agents under a theory of respondeat superior. For some sanctions, like administrative fines, companies would be strictly liable for the actions of their corporate leaders and personnel. These are dramatic developments in a country where the notion of corporate liability has historically received only limited recognition.
Prohibited Conduct. The new law would apply to bribery of Brazilian officials and of foreign public officials. In this way, it would impact Brazilian companies doing business in foreign countries, and the Brazilian subsidiaries of foreign companies doing business in Brazil.
Sanctions. The legislation creates stiff penalties. It includes administrative fines of up to 20% of the gross revenue in the previous fiscal year of the responsible legal entity, and these fines cannot be lower than the advantage obtained. If authorities are unable to calculate the gross revenue, the legislation provides an alternate fine range of as low as R$ 6,000 (approximately US$ 3,000) and as high as R$ 60 million (approximately US$ 30 million). Administrative sanctions would be made public. In addition, judicial penalties can include disgorgement of benefits obtained, suspension of company activities, and even the dissolution of the legal entity. In setting sanctions levels, the law would direct authorities to take into account various factors, including the seriousness of the offense, the advantage obtained or sought, whether or not the offense was completed, the nature of damages, and the existence of other harmful effects.
Credit for Compliance Programs. The bill explicitly provides credit for anti-corruption compliance programs in determining sanction levels. This represents a remarkable step forward for Brazil, a market where notions of compliance continue to gain traction among the business community. The legislation specifically references internal integrity procedures, audits, and reporting mechanisms as key components of compliance. Brazil’s Executive Branch would be expected to issue more detailed guidance in the future.
Cooperation Rewarded. Companies that cooperate with government investigations are given credit when sanctions are applied. However, the exact meaning and nature of cooperation remains to be understood.
Self-Disclosure Rewarded. Companies that self disclose violations can reduce fines by up to 66%, though offenders must still give restitution for the damages they cause. Some administrative and judicial sanctions would be excluded from this calculation. To be eligible for such benefit, the company must be the first to come forward, must be willing to cooperate with the government’s investigation, must cease involvement in the wrongdoing, and must admit its participation in the offense. It is still unclear whether companies that self disclose would continue to be liable under other statutes in the country.
These are significant developments for Brazil’s anti-corruption legal regime. Nonetheless, some believe that the reforms might still not be enough for Brazil to meet its obligations under the OECD’s Anti-Bribery Convention. While Article 3(2) of the Convention requires sanctions for foreign bribery to be “effective, proportionate, and dissuasive,” companies could find loopholes around meaningful penalties. For example, if the sanctions calculation is limited to the gross revenue of the line of business where the wrongdoing occurred, rather than of the overall revenue of the company, the result might not have an adequate deterrent effect. Moreover, the fact that debarment has been excluded from the final list of possible judicial sanctions raises questions about the effectiveness of penalties. These issues will surely be reviewed by the OECD’s Working Group in its 2014 Review.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.
© 2013 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments